Sheila M. Harvey is a partner, Reza S. Zarghamee is special counsel, and Jonathan M. Ocker is a partner at Pillsbury Winthrop Shaw Pittman LLP. This post is based on a Pillsbury memorandum by Ms. Harvey, Mr. Zarghamee, Mr. Ocker, Ashleigh K. Acevedo, and Roslyn Akel. Related research from the Program on Corporate Governance includes The Illusory Promise of Stakeholder Governance by Lucian A. Bebchuk and Roberto Tallarita (discussed on the Forum here) and Socially Responsible Firms by Alan Ferrell, Hao Liang, and Luc Renneboog (discussed on the Forum here).
Takeaways
- Corporate boards should partner with management to ensure appropriate and regular oversight of environmental issues critical to the long-term economic success and reputation of the company.
- Either the board or an authorized committee should receive briefings on environmental matters/risks that may jeopardize a company’s reputation and corrective action undertaken to address those risks.
- Management should monitor environmental disclosures and rankings of peer firms and consult with the board on how to improve their company’s standing relative to competing firms and in terms of stakeholder expectations.
Introduction
Environmental stewardship, including efforts to mitigate climate change and other impacts on the natural environment, is an important and controversial topic in today’s world. Politicians, companies, investors, consumers and the public all have a stake in how businesses approach environmental stewardship. The 2020 Davos Manifesto of the World Economic Forum (WEF) reflects the current trend of scrutinizing businesses based on their environmental performance. Addressing companies and the world’s top 120 CEOs, the Manifesto states, in part: